Friday, December 7, 2012

Have You Heard Of The Bowman vs Monsanto Case?

The farmer Vernon Bowman has filed his opening merits brief explaining his exhaustion defense against Monsanto's patent infringement charges. The case involves Monsanto's patented soybeans that have been genetically modified to be resistant to the broadleaf herbicide glyphosate, i.e., RoundUp Ready. U.S. Patent Nos. 5,352,605 and RE 39,247.

According to the statement of facts, Bowman purchased genetically modified soybeans on the commodity markets from a third party vender. It is assumed for the case that those seeds were grown and sold by farmers pursuant to a contract with Monsanto. As such, under traditional patent exhaustion principles, Monsanto's patents conferred no more control over the use, destruction, or distribution of those soybeans. This would have allowed Bowman to use the soybeans as feed or for biodiesel. However, Bowman chose to use the soybeans as seeds to grow a second generation of soybeans. Because soybeans self-fertilize, beans from the second and subsequent generations are genetically identical to the first generation and thus fit within the scope of Monsanto's patents. Although perhaps irrelevant to this case, Bowman admittedly purchased the commodity seeds with the hope that they were glyphosate resistant and then relied upon glyphosate resistance in the growing process. At the same time, he took pains to ensure that he was not violating any contract with Monsanto or pushing the grain dealer to violate such a contract.

Monsanto sued Bowman for patent infringement and won.

Exhaustion: Both the district court and the Court of Appeals for the Federal Circuit held that the exhaustion doctrine does not apply to new copies of a patented product created by the accused infringer. Monsanto sees its seed patents as akin to a book covered by copyright. When the publisher sells copies of the book, the copyright in those copies is exhausted -- allowing the purchaser to resell or distribute the copies without reprisal. However, there is a major limitation to the exhaustion doctrine -- copyright still protects against using the legitimate copy to make further unauthorized copies. For Monsanto, the fact that the patent is exhausted vis-à-vis a first generation of seeds says nothing about whether the patent is exhausted for the second or subsequent generation. Unlike the copyright laws, the patent law of exhaustion has not been codified, but the two doctrines are largely in step. The Supreme Court is currently considering a copyright exhaustion case, Kirtsaeng v. John Wiley & Sons, Inc. However, the outcome of that case is unlikely to impact Bowman's.

Monsanto also relies upon a property-law defense that limitations-on-use placed on the sale of patented goods operate as conditions that also bind subsequent purchasers. Here the original farmers were bound by contract not to replant the soybeans. Following the rule of derivative title, Monsanto argued (and the lower courts agreed) that "farmers could not convey to the grain dealers what they did not possess themselves." And further, that the grain dealers could only transfer to Bowman as much right as they possessed that right being ownership of the soybeans without the right to use them as seed.

Pathway to Victory: Bowman's pathway to a Supreme Court victory seems to rest on two necessary holdings: (1) that the patent rights were fully exhausted in the seeds Bowman purchased and (2) that the exhaustion applies to subsequent generations of seeds. In my view, the first principle is will be easier to accomplish. The second is more difficult.

In Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008), the Supreme Court confirmed that "[t]he longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item." The correct view is here is that a condition on use does not bind subsequent purchasers of personalty unless those buyers agree by contract to be so bound. This is the ordinary rule that courts follow involving personal property and I see no reason to change that rule based upon the fact that the personal property happens to be covered by a patent.

Subsequent Copies: The fact that a patented product is the subject of a legitimate sale that exhausts the patent rights does not give the purchaser the right to use that original as the source for generating subsequent copies. Rather, the creation of those additional copies will be deemed counterfeit and infringing. Bowman does not challenge these basic principles. Rather, Bowman argues that soybeans are different because they are self-replicating seeds. Bowman writes:

If patent rights in seeds sold in an authorized sale are exhausted, patent rights in seeds grown by lawful planting must be exhausted as well. Due to the self-replicating nature of the invention, subsequent generations of seeds are embodied in previous generations . . . because seeds will self-replicate by normal use.

The farmers that I know largely side with Bowman on the issues, but they would quarrel with the idea of self-replication. In fact, farmers do an incredible about of work to grow a commercially viable crop. At a minimum for a good crop, the seeds need to be planted in sufficiently fertilized soil, watered (hopefully by rain), weeded (perhaps with glyphosate), and harvested. The timing must be right to ensure sufficient light and heat, and the fields must be protected from invading wildlife. In this sense, Bowman's statement that "Roundup Ready® seeds have been engineered to include everything one needs to practice the invention" is disingenuous. In any event, it takes much more outside input to grow a second generation of soybeans than it does to distribute electronic copies of my copyrighted writings or deliver electronic copies of non-patent prior art to the USPTO. In fact, we teach in law school that the ease of replication is an important factor in understanding the role of intellectual property rights. In an e-mail, David Snively, executive vice president and general counsel for Monsanto agrees with this point, writing that the "patent system protects – and should protect – the rights to easily replicated technologies like herbicide-tolerant seeds, just as it does for those who invent computers or life-saving medicines."

Perhaps the self-replication difference is not about energy input, but more about the nature of the product (a living organism in the form of a seed) and the fact that living organisms reproduce as part of their natural life cycle. Monsanto added an important element to its soybeans (glyphosate resistance), but Monsanto started with an incredible life form with the ability to reproduce in our natural world. Monsanto did not change or enhance any of those reproductive abilities and its attempt to control reproduction is could be seen as akin to the improper tying arguments. The fact that Monsanto made a big claim (the seed itself) doesn't change the fact that its contribution is far less than 1% of the genetic material important for a soybean's life cycle.

Finally, the hook on the argument may be that self-replication is the "normal use" of a product. This market expectation is important and could win the day. In the brief, Bowman takes pains to establish that replanting is an important normal use of commodity seeds. It is unclear to me whether the court will buy this factual argument and would be an important gap that could be filled by an amicus filing.

The seeds at issue here will self-replicate or "sprout" unless stored in a controlled manner to prevent this natural occurrence. Humans can (and most often do) assist in the process of self-replication. For instance, Bowman planted Roundup Ready® seeds and treated them with glyphosate. This activity led in part to the creation of new soybeans having the patented Roundup Ready® trait. But it was the planted soybean, not Bowman, that "physically connected" all elements of the claimed invention into an "operable whole."

Referencing and quoting Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972). While important, this argument seemingly would not offer a complete win for Bowman because he may also be liable for using or selling the second generation.

One interesting rhetorical element of Bowman's brief is the way that it claims the middle ground by arguing that the court "should not create an exception to the traditional exhaustion doctrine for self-replicating technologies." (Bold in original). The starting point depends upon your perspective and I suspect that Monsanto will have a similar statement arguing that Bowman is asking for the exception.

Monsanto's brief of the merits is due January 16, 2013. Oral arguments and a decision will follow. - Dennis Crouch, Patentlyo

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